The Costs of Climate Change: Critical Elements
7. Climatic Surprise, Risk-aversion, and the Planetary System
A final issue is that of possible climatic surprises, and of associated risk aversion. The impact studies to date have tended t o assume not only that climatic change is relatively smooth, but also that there are no surprises.
But as noted above, there could be. Given current knowledge, perhaps the most credible "surprise" is that ocean current patterns will change, maybe rather suddenly. This could result in rapid regional temperature changes of well over 5OC (Dansgaard et al., 1989; Calvin, 1991); Europe for example could become largely icebound if the Gulf stream were t o switch, and icy regions elsewhere could melt with catastrophic subsidence and/or flooding.
This could impose great costs, perhaps including starvation even in parts of the industrialized world as agriculture and infrastructure struggle t o adjust.
Concerning other possible "surprises", disintegration of the West Antarc- tic Ice Sheet - raising sea levels by many meters - is almost certainly a slow phenomena taking many centuries
.
In principle the northern polar ice cap could change much faster, with little impact on sea levels but unknown implications for climatic patterns (Weiner, 1990). Another issue is how nat- ural greenhouse gas sources and sinks may respond; current evidence sug- gests that these will respond to warming by amplifying the human-induced increase in greenhouse gas concentrations (Hoffert, 1992), and some have painted scenarios of runaway feedbacks (Leggett, 1991). Overall, the nag- ging fear is that there might be surprises in store which have simply not yet been thought of.The underlying issue in all this is that humanity is interfering with im- mensely complex and interactive global systems that are far from adequately understood. Scientists and economists have sought to take a reductionist approach t o climate change, modeling the components and trying t o esti- mate the impact of changes on each. However, as highlighted eloquently by Weiner (1990), the Earth is a fantastically complex system, with ma- jor and ill-understood interactions between the atmosphere, the aquasphere (oceans), the cryosphere (ice), the lithosphere (physical and chemical struc- ture of the surface), and the biosphere (life). Not only do these interact, but
d
are also affected directly by human activities, t o varying degrees, and most are affected one way or another by the changing heat balance andchemical composition of the atmosphere. There is no way of tracing all the possible consequences.
Whether or not one accepts Lovelock's full "Gaia hypothesis7' andogy of the Earth itself as a living organism, it is obvious that such a system has the potential for major surprises and highly non-linear responses t o planetary- scale perturbations. The fluctuations of the last twenty thousand years alone suggest a far from constant and stable system. Lovelock (1988) suggests salt in the human system as an analogy for COz in the planetary system, and considers that "the carbon dioxide regulation system is nearing the end of its capacity."4 Given its role in fertilizing Cg plant growth, and generally speeding up both the carbon and water cycles, steroids might be an equally appropriate analogy. It still does not follow that ever more is benign.
This seems an important complement t o the reductionist approach be- cause it serves as a reminder that the problem may not be just a matter of calculating the costs of raising sea walls and changing crops. In the fa- mous words of Revelle and Suess (1957), humanity is conducting a "grand geophysical experiment".
Decision theory has of course long considered issues of decision-making under uncertainty, even very large uncertainties, generally within the frame- work of "subjective expected utility" (SEU) theory. One of the most basic outcomes is that unlikely outcomes are not necessarily irrelevant; as Collard (1987) puts it, "while it may or may not be possible t o neglect tiny probabil- ities, it is not permissible t o assume that they may be safely ignored". What matters is the relationship between the probability and cost of more extreme events. If the cost of successively more extreme outcomes rises more rapidly than the probability declines, the "cost benefit" analysis becomes dominated by the high cost, low-probability events. At present there is simply no way 4Lovelock has been attacked by environmentalists for his suggestion t h a t ozone deple- tion is a minor problem in Gaian terms, and has been misinterpreted by others as arguing t h a t t h e earth has a n immense natural capacity for automatically "healingn biotic damage.
But concerning t h e CO2 problem, and observing the oscillations of the Ice Age, Lovelock
of knowing whether this is the case with climate change, but it certainly cannot be e x c l ~ d e d . ~
The importance of ignorance and possible surprises is amplified by the inertia and irreversibility of many climate change impacts. Over and above SEU-based results, such circumstances call for a strong measure of risk-
Estimating the potential costs associated with rising greenhouse gas levels is an important, but very ambitious and a t present speculative task. If such estimates are t o be more objective and useful than the collective judgments expressed in terms of (for example) negotiated emission targets, they will need t o convince observers that the major issues have been taken into ac- count. Current estimates do not achieve this, and this paper has suggested five areas which require particular attention.
(i) The potential local and regional dynamics of climate change, and its predictability, appear poorly understood. Do we expect climate change t o proceed relatively smoothly towards a new state, or is greater and unpredictable variability likely during the transition? How robust are agricultural systems especially t o such variability, and what costs may it impose? This issue appears t o have received very little attention, in part because of the focus of most GCM modeling upon aggregate statistics, and equilibrium changes.
(ii) The likely impacts on some developing countries appear much more se- vere than upon more robust developed economies. Some discussions paint scenarios of severe drought or flooding, with starvation, homeless- ness and forced migration. How likely are such outcomes? How should
'It appears implausible that the (dis)utility of possible climate damages can be offset to zero by the possibility of beneficial outcomes. Even on an optimistic view of COz fertilization, etc., the probability seems low that adapting to changing conditions at the rate and degree implied by most forecasts would result in net benefits. Even on such an extremely optimistic view the possible scale of gains seems clearly limited (e.g., set by the limited scope for further reductions in agricultural costs) - limits which do not necessarily apply to ~ o s s i b l e damages. The distribution of possible costs thus appears to be highly asymmetric.
they be valued? What could be done to reduce such impacts, and insofar as this requires international transfers, how likely is it that such assis- tance will be forthcoming in an effective and timely way? Such questions have received some popular attention, but relatively little analysis, al- though this is beginning to change with the country studies of UNEP for the IPCC, and the national studies required for the climate convention.
(iii) What might be the extent of non-market impacts, both in terms of direct human welfare (e.g., health and welfare losses and benefits associ- ated with warmer climates and precipitation change), and other impacts (e.g., on ecosystems and species loss)? This issue has been more widely recognized among economic studies, but is still far from being resolved, and obviously depends heavily upon resolution of the first two issues raised.
(iv) What climatic and other changes might be implied by the very high COz concentrations projected for the very long term? What impacts might these have: to what extent could they be mitigated over the long timespan available, or might they threaten more fundamental losses (e.g., from extensive sea-level rise)? How should such very long-term impacts be valued? These issues have received very little attention, with the exception of the recent work by Cline (1992), and it is to be hoped that the challenge issued by his analysis will provoke more serious work in this area; as yet, hardly anything seems resolved.
(v) What are the possible surprises in the system? Currently, a rapid change in ocean circulation patterns seems the most widely touted, despite which we have neither estimates of its probability, nor of the possible impacts if it should occur. Natural emission feedbacks and changing carbon fixation rates may amplify the growth in concentrations, and eventual disintegration of polar ice sheets seems likely, but the poten- tial for more rapid-than-expected change in either seems uncertain. Is our understanding sufficient to be relatively confident that we have not missed something important? What costs would be involved? And how should we weight issues which are judged t o be very low probability, but high cost? These issues are now beginning to receive more attention, but as yet we do not seem remotely close to answers.
Given all these factors, the task facing those who seek to quantify the costs of climate change is either to make and justify rough estimates con- cerning each of these (as Cline has attempted for some non-market, and for long-term impacts), or to argue plausibly that each of the five factors is negligible compared with factors already quantified.
This has not yet been done. Until this has been achieved, costlbenefit studies which focus upon quantifiable elements present a false sense of con- fidence and complacency. In such studies, it would be better to conduct analyses which recognize explicitly the wide range of uncertainties explicitly.
For example, studies could examine the implications of:
welfare losses of both one percent and 10 percent of global GDP associ- ated with the 50-year transition t o a doubled COz equivalent;
both high and low rates of time preference;
both weak (e.g., linear) and strong (e.g., cubic) functions relating the degree of damage t o the rate and/or degree of climatic change.
More disaggregated studies could seek t o delineate the potential impor- tance of developing country impacts, non-market impacts, and/or climatic surprises.
Such analyses would not provide simple policy answers, because none ex- ist. But they would improve our understanding of the relationship between different impact uncertainties and optimal policies, and highlight the impor- tant uncertainties, and thus help to focus the policy and research agendas associated with climate change.
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